Kodiak Energy Inc. - QwikReport - Mon Sep 6, 2010

KODIAK ENERGY INC. : http://www.kodiakpetroleum.com/ : QwikReport

Sofia

Summary

Kodiak acquired 100% Working Interest of 53,687 acres through the Thunder River acquisition

Kodiak is one of the largest mineral rights holders in the area

The additional land acquired by Kodiak in May 2008 is close to the Sheep Mountain Pipeline, which transmits CO2 for enhanced oil recovery (EOR) to the Permian Basin area located in southeastern United States

The New Mexico play consists of:

Developing a large CO2 resource with commercial volumes in existing well tests

Secondary recoveries from "old" oil positions in the Permian Basin

CO2 is used for enhanced oil recovery (EOR) projects in mature fields
These are projects where additional reserves can be recovered or production can be prolonged after initial recovery methods have been used
In many situations, production can be "revived" or enhanced through the injection of CO2 into the reservoir and essentially forcing the oil to the surface through the well bore
EOR can increase production efficiency and can prolong the economic life of older fields by as much as 30 years

Potentials for new oil and gas and helium on the project properties

Helium is used in the medical (magnetic resonance), science (research and mass spectroscopy), technology (fiber optics and microchip production) and fabrication (welding) industries -- it is a very stable, non-reactive and non-flammable gas
In addition, NASA uses large amounts of helium to pressurize space shuttle fuel tanks
Helium is non-renewable, irreplaceable, and there is no known method to synthetically create or manufacture it
Existing supplies of helium are becoming increasingly costly

Kodiak drilled and cased 3 wells in 2008

The formations of Santa Rosa, Yeso, and Glorieta were perforated and flow tested
The test results identified CO2 concentration quality from approximately 98.4% to 99.5%
Trace amounts of helium were detected

A 35 mile, 2D high resolution seismic program was completed in April 2008 and enabled the mapping of the probable long term development for the area

Management Discussion of New Mexico Properties - Sept 2008 (PDF)

Surface Geology (PDF)

The 35 mile 2D high resolution seismic program was completed on schedule and on budget and after reviewing the seismic data, the Company was able to effectively map out a probable long term development area which would result in CO2 production from the previously identified formations. The seismic is currently being evaluated to identify possible conventional oil and gas prospects on the leased project area.

A preliminary project feasibility study was commissioned to identify capital development costs and timelines as well as projected operating costs in order to provide information to support a large scale long-term plan of development. This information will enable the definitions for pipeline access planning and negotiation, transportation agreements, sales contracts for the CO2, additional land acquisition terms and conditions, facility engineering and construction and ultimately the parameters for financing the project development

Several companies have expressed interest in participating in the New Mexico properties at several levels of involvement. Discussions are still ongoing with several firms regarding potential opportunities for the project, including integration of the CO2 production into Permian Basin enhanced oil recovery projects and the Company has also entered into farm-out negotiations with several companies interested in exploring deeper oil and natural gas prospects on the properties.

Due to lower commodity prices for Permian Basin oil (the primary market for CO2) and CO2 contract prices (deliverable into the Denver City Hub), aggressive development is not financeable at this time. Aside from ongoing maintenance of leases and wells, the Company is focusing its efforts on updating engineering models, and business opportunities so that when prices recover and investment markets improve, we will have the opportunity to move this project forward. The leases are 10 year leases and no expiries are imminent.

This information on this website or discussion documents contains the terms "estimated reserves based on escalating pricing" and "contingent resources". The Company advises investors that although these terms are recognized and required by Canadian securities regulations (under National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities), the US Securities and Exchange Commission does not recognize these terms. . In addition, "estimated reserve value" has an amount of uncertainty as to their existence, and economic and legal feasibility In addition, "prospective or contingent resources" have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that any part of a prospective or contingent resource will ever be upgraded to a higher category. Under Canadian rules, estimates of prospective or contingent resources may not form the basis of feasibility or pre-feasibility studies, or economic studies except for a "preliminary assessment" as defined under National Instrument 51-101. CAUTIONARY NOTE TO U.S. INVESTORS - The United States Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions and constant pricing. We use certain terms on this management discussion, such as prospective resource or economic forecast based on escalating pricing, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 10K. You can also obtain this form from the SEC by calling 1-800-SEC-0330.

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This page was created on Mon Sep 6, 2010 at 5:40:25 AM Pacific Time.